Total fund benchmarking

October 2022

Benchmarking is a common and prudent practice in the investment industry. Many institutional investors spend significant time focusing on the benchmarks for their asset managers and how those managers perform relative to their respective benchmarks. However, it is arguably more important for those institutions to concentrate on and evaluate the success of their overall investment program. This is where total fund benchmarking comes into play.

There are a variety of methods that institutions use for developing total fund benchmarks. The different types of benchmarks reflect different criteria and philosophies for benchmark construction and evaluation. Yet, practical implementation among large institutional portfolios has led to several commonalities and trends in recent years. The following paper explores the various trends and challenges among total fund benchmarking practices.